When it comes to
governance and accountability the feds should practice before
they preach

By Walter Robinsonweb
posted July 22, 2002

Recently leaders in the accounting profession announced the creation
of an independent public oversight body to ensure the quality and integrity
of audits conducted by Canadian accounting firms. In short, this body
will audit the auditors. This move stems from the seemingly endless stream
of accounting and corporate disclosure scandals that have rocked the markets
in recent months.

The list of companies  think Adelphia, Enron, Global Crossing,
Sunbeam, Xerox etc.  in the throws of bankruptcy, under regulatory
scrutiny, engaging in questionable accounting practices, or restating
financials is long. As a result stock prices tanked, creditors were stiffed,
and employees have been laid off holding millions in worthless stock options.

In fairness, most corporate titans are not party to such activity, but
confidence in corporate institutions has eroded. So the creation of an
independent, non-governmental body is welcome. While the Department of
Finance praised this new body, a news release from Minister John Manley
insisted that further action  five specific steps  must be
taken.

1) Strengthening Corporate Governance. Companies in Canada must be seen
to be governing themselves in a responsible and principled way in the
best interests of shareholders.

No disagreement here. Now if only the federal government would hold itself
to this same standard. Wasting $40 million annually in sponsorships, and
writing off hundreds of millions of dollars in corporate welfare loans
is not in the interests of Canada's shareholders (read: taxpayers).

2) Ensuring Management Accountability. Senior executives must ensure
the veracity and completeness of their public disclosures, including their
financial statements.

Another common sense idea. Sadly Ottawa has booked $7.7 billion in arm's
length foundations. And it consistently underestimates federal tax revenues
while ratcheting up mid-year spending.

This is a no-brainer. However, the last two spring economic updates (May
2001, June 2002) from two different finance ministers were devoid of numbers,
projections, etc. The gall of Ottawa to offer counsel on financial reporting
is astonishing.

4) Toughening Enforcement. Individuals and companies that violate the
public trust must face punishment that is consistent with the seriousness
of the violation.

Absolutely. But hopefully Canada's corporate police won't follow Ottawa's
example when it comes to punishment: Denmark already has an ambassador.

5) Enhancing Further Credibility of the Audit Process. Investors must
have confidence in the independence and integrity of companies' external
auditors.

Yes they must. But taxpayers have expressed their confidence in the government's
external auditor: the Auditor General (AG). Now if only federal Liberal
MPs would cease their efforts to undermine and discredit the integrity,
independence and merits of the AGs work.

When it comes to governance and accountability, the feds should practice
before they preach.